1.

Why should MC curve cut MR curve from below to achieve producer's equilibrium ?

Answer»


Solution :One of the two conditions of the establishement of stable EQUILIBRIUM of a firm is that its MC curve should CUT the MR curve from below. Not from above . If the MC curve cuts the MR curve from above. The equilibrium so ESTABLISHED shall not be stable as it will be possible to add to profits by PRODUCING more. The idea is that beyond the point of equilibrium the MC should be greater then MR so that further production BECOMES uneconomical.


Discussion

No Comment Found